Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

The effectiveness of internal controls is greatly influenced by the overall culture and environment within an organization, especially concerning how employees are treated. When policy violations occur and are not addressed, it can create a troubling precedent where rules and regulations seem irrelevant. This oversight leads to a lack of accountability among employees, which can erode trust in the internal control systems put in place.

When employees see that violations are ignored, they may feel that adhering to policies is optional. This perception can encourage further violations and risk-taking behaviors, which directly compromises the integrity of internal controls designed to mitigate risks and ensure compliance with regulations and policies. Over time, an organization that fails to address violations can face increased instances of fraud, error, and non-compliance, leading to significant repercussions.

In contrast, recognizing high performers, conducting thorough performance reviews, and providing adequate training resources strengthen the organization’s internal control framework. These practices enhance employee morale and engagement, create a clearer understanding of expectations, and mitigate risks by ensuring employees are well-informed and appreciated for their compliance with established policies.